The Dems’ Student Loan Forgiveness Scheme
Desperate to avoid a midterm shellacking, Democrats may resort to bailing out irresponsible borrowers.
Americans like to rally around their president during times of global uncertainty. But they’re not rallying around Joe Biden. His approval ratings are terrible, and Democrats are now getting desperate to salvage [read: “buy”] as many votes as they can before November’s midterm elections.
One scheme they’re floating is a further extension of the student loan freeze, currently set to expire on May 1. They want students to be able to kick the can down the road at least until after they’ve voted Democrat. Like our energy dependence, though, the federal loan debacle could have been avoided.
As we wrote last year, “The plan to erase student debt is yet another example of the government riding in on a white horse and promising to save us from a crisis government created in the first place.”
The Wall Street Journal editorial board goes further, writing: “Here we go again. The March 2020 Cares Act provided a temporary pause on loan payments and interest accrual through September 2020. Presidents Trump and Biden used emergency executive power to extend the forbearance, which has cost taxpayers about $5 billion a month. Borrowers have saved on average $400 a month. Most haven’t needed the relief.”
So far, the extensions have cost taxpayers at least $100 billion.
The editors add that there’s more going on behind the scenes, including an effort pitched by Democrat Senator Elizabeth Warren to allow some students to cancel as much as $50,000 in loan debt.
Not surprisingly, there’s no mention of the students who’ve done the right thing and made good on their loans over the years without whining for help. It’s doubtful that they’ll ever be reimbursed, but students who never had any intention of paying off their loans might well be rewarded.
Warren’s proposal is actually timid compared to another idea being mentioned by former Secretary of Education John King, who wants the federal government to cancel the entire $1.7 trillion owed by current and former American college students. To put this into perspective, total federal spending in 2021 was $6.8 trillion.
Of course, this is all about politics. As Politico reports, “Advocates in close touch with the White House are impatient, arguing that even if Biden ultimately moves forward with another payment suspension by the May expiration date, it’s becoming increasingly tough for them to inspire restive young voters to match their record 2020 or 2018 turnout levels.”
The Department of Education isn’t waiting until that May 1 expiration date, announcing recently that a select group of 100,000 borrowers will have $6.2 billion in student loans canceled. The catch is that borrowers need to qualify for the Public Service Loan Forgiveness Program, among other requirements.
And there’s another group that can’t be pleased by all this talk of loan forgiveness: private loan borrowers. You see, in the real world outside the Beltway, lending banks tend to want their money back, and there’s little Elizabeth Warren or Joe Biden can do about it. Unfortunately, a significant number of borrowers hold both federal and private loans.
“Private student loans are held by private banks,” columnist Sydney Lake writes, “and there’s no real incentive or reason for those companies to cancel out those loans. They’d be losing out on that money and all the interest they expect to make on those loans over the next several years. Plus, the federal government can’t force banks to forgive private student loans.”
The government shouldn’t allow colleges to hand out thousands of dollars of loans to students far beyond the cost of books and tuition, or to students who couldn’t qualify for a private loan in the first place. And let’s not forget that the beneficiaries of any student loan forgiveness scheme aren’t likely to be poorer students or people of color. Instead, they’ll be well-to-do liberal elites.
The Democrats have been pledging to wipe out student loan debt for years, but they’ve never pulled it off. And even with all the power now in their hands, it’s unlikely to happen this year either.
Maybe, when Republicans take Congress in January 2023, they’ll put an end to all this nonsense about debt forgiveness. And maybe they’ll fix the problem that caused this mess in the first place.
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